TL;DR:
- FTX’s Sam Bankman-Fried’s crypto empire has crumbled amid fraud allegations and misappropriated funds.
- Kristin Smith, the executive director of the Blockchain Association, claims that SBF did a lot of damage and was pushing forward an FTX-specific strategy instead of a crypto-wide strategy.
- Bankman-Fried was heavily involved in lobbying efforts in Washington D.C. and the recent allegations against him has made lawmakers uncomfortable with his role in legislation.
FTX and Sam Bankman-Fried’s Lobbying Efforts in Washington D.C. FTX founder Sam Bankman-Fried spent more time lobbying lawmakers in Washington D.C. than any other executive that Kristin Smith, the executive director of the Blockchain Association, has seen in her 20-year career. According to Smith, Bankman-Fried’s efforts “did a tremendous amount of damage” to the crypto industry and that FTX was never a member of the Blockchain Association.
Bankman-Fried’s crypto empire, FTX was once a leading player in the cryptocurrency industry, with its founder Sam Bankman-Fried being one of the most vocal and influential figures in the crypto space. However, the company’s fortunes took a turn for the worse in November 2022 when a leaked balance sheet showed that Alameda Research, Bankman-Fried’s trading desk, held billions worth of FTT, the FTX utility token, against billions worth of liabilities.
As soon as the news broke, users started withdrawing billions from FTX, and the company was unable to recover from the massive outflow of funds. In a last-ditch effort to stay afloat, FTX announced that it had a letter of intent to be acquired by competitor Binance. However, a day into the due diligence process, Binance backed out and said the company was “beyond our ability to help.” By the end of the week, Bankman-Fried had resigned, and FTX and 130 other entities filed for Chapter 11 bankruptcy protection.
The bankruptcy was a major blow to the cryptocurrency community, and the federal charges—both civil and criminal—pending against Bankman-Fried made lawmakers even more uneasy about his involvement in legislation. In fact, it was revealed during the FTX bankruptcy proceedings that the company had an office across the street from the White House.
FTX-Specific Strategy vs Crypto-Wide Strategy Smith also stated that Bankman-Fried’s lobbying efforts were pushing forward an FTX-specific strategy instead of a crypto-wide strategy, which was creating difficulties for the Blockchain Association. She mentioned that the crypto community criticized Bankman-Fried en masse for backing the Digital Commodities Consumer Protection Act of 2022, which was labeled a “DeFi killer.” The bill proposed applying the same registration and compliance rules to decentralized finance as it would to centralized entities, like FTX, and might capture DeFi protocols, which cannot comply.
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